Cachia v Walker & Ors

[2002] HCATrans 526

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M173 of 2002

B e t w e e n -

JOHN DORMAN ELLIOTT

Applicant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

Application for removal pursuant to section 40 of the Judiciary Act 1903 (Cth)

GLEESON CJ
McHUGH J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON THURSDAY, 24 OCTOBER 2002, AT 11.14 AM

Copyright in the High Court of Australia

MR M.D. WYLES:   If your Honours please, I appear in that matter for the applicant.  (instructed by Tress Cocks & Maddox)

MR N.J. YOUNG, QC:   May it please the Court, I appear with my learned friend, MR P.D. CRUTCHFIELD, for the respondent.  (instructed by Australian Securities and Investments Commission)

GLEESON CJ:   Yes, Mr Wyles.

MR WYLES:   Your Honours, on this application we seek to have removed into this Court from the Supreme Court of Victoria what might be described as the power issue, the power of ASIC, which has emerged in the course of the trial of that proceeding.  I can report immediately to your Honours that the stage of the trial is that the second defendant, my client, yesterday commenced evidence by the introduction of evidence from an expert and the expert has finished giving his evidence and the trial judge has stood the matter down until Monday.

The matter which, it is submitted, is appropriate to be removed is the question of ASIC’s power in circumstances where the decision of this Court in Hughes does not answer the questions and that the issue which now emerges is whether or not the provisions of the Corporations (Administrative Actions) Act of Victoria, in particular sections 5 and 6, can, by dint of their retrospective operation, effectively confer upon the Federal Parliament power which it did not have at the time the proceeding against my client was commenced.

HAYNE J:   Could you put that again – whether the Corporations (Administrative Actions) Act conferred power?

MR WYLES:   Yes, your Honour, can confer power, can now ‑ ‑ ‑

HAYNE J:   But does it purport to?

MR WYLES:   Can I take your Honours to that Act and in particular sections 5 and 6.  The situation is on all fours with the situation which confronted the Court in University of Wollongong v Metwally.  When we have regard to section 5 of that Act by a statutory fiction of deeming the Parliament of Victoria now seeks to pretend that actions taken by – and in this particular instance, your Honour Justice Hayne, I refer to ASIC to identify – ASIC at a time when ASIC may not have had the power - and in fact this section can only operate if ASIC did not have the power to take that action – will now by statutory fiction be pretended to be an Act of a body of Victoria.

HAYNE J:   I thought you were putting a proposition that there was some conferral on…...

MR WYLES:   Your Honour, in my submission, it now operates this way.  The effect of that statutory deeming is no less than the effect which was before the Court in Metwally and what it effectively says is that in consequence of having deemed an action, to be taken not by the Commonwealth body but by a State body, we can now validate that action taken. The effect is to sidestep the provisions of the Constitution itself insofar as they limit the power of the Federal Parliament at any particular point in time.

That step of sidestepping those provisions results because once you say, “We will now pretend that action which was taken was in fact not the action of a Commonwealth body but was in fact the action of a State body”, then, having gone down that path, it matters not that at the time the federal body took the action it was doing so pursuant to a statute which the Commonwealth Parliament, the Federal Parliament, had no power to enact.  That is the situation which his Honour Chief Justice Gibbs described in Metwally as not being acceptable and he was joined in that by his Honour Justice Deane.

The effect of sections 5 and 6 of the Act is not that effect which was approved by the Court in Kidman.  It is an entirely different effect.  The reason it is a different effect is because it seeks to change the fact, not the consequence of the fact.  By seeking to change that fact and not the consequence, it effectively delivers power where there was no power.  The operation of the Act itself is conditioned upon an absence of power.  It is directed to an absence of power in consequence of this Court’s decision in Hughes.  What it then says is, “We will now by dint of State law pretend that those actions were not taken by the federal body”.

In Metwally his Honour Chief Justice Gibbs rejected an argument that the Commonwealth could retrospectively change a law.  In Metwally the situation was that section 109 of the Constitution operated so that the State law could not prevail at the relevant time. The Federal Parliament then sought to enact a law saying that it would be taken that the federal law would not override the State law at the relevant point in time. His Honour Chief Justice Gibbs rejected that argument that the Commonwealth could retrospectively change a law with the result that the State law would be retrospectively invalidated or validated. It can be no less an affront to the Constitution itself for a State Parliament to now pass retrospective legislation with the result that the invalid federal action, because of the want of power, would be retrospectively validated.

That is a fundamental issue which is raised by the answer which ASIC seeks to raise to the challenge which is made to its power to have commenced this proceeding from the outset.  In effect, in the submissions made ASIC says all of this has been rectified and has been rectified by this State legislation and complementary federal legislation.

HAYNE J:   I think that may not be quite doing justice to the ASIC submission, may it?  They say there is no problem to rectify.

MR WYLES:   They do, your Honour.  I recognise that and I do not mean to do any injustice, but at the end of the day they say there is no problem to rectify because they say that Hughes is the answer.  But Hughes did not consider the effect or the extent of section 11(7) of the ASIC Act itself. Hughes was concerned with the power being conferred by a State to the DPP which itself had its powers pursuant to, I think, section 6 of the DPP Act enacted pursuant to the incidental power of the Federal Parliament.  As was pointed out by the Court in Hughes, of course the Commonwealth has power to legislate with respect to offences in respect to any head of power which it might have as part of its incidental power.

That is not the position which confronts the Court on this application. The position which confronts the Court on this application is the question of the extent of section 11(7) in the circumstances of a scheme which was introduced by the Parliament specifically relying upon its powers pursuant to section 122 of the Constitution. So, your Honours, we recognise that ASIC says that there is no problem to be dealt with but it then says that even if there is the problem, the safety net is the recent legislation.

HAYNE J:   It says it relies on 11(7) and also relies on 47(1) in the regulations, does it not?

MR WYLES:   It does, your Honour.

HAYNE J:   It was considered in Hughes, was it not?

MR WYLES:   Section 47(1), yes, your Honour, certainly was considered in Hughes and the real question that then emerges is whether or not ASIC is a Commonwealth authority for the purposes of 47(1).  Your Honour will say to me that is a matter of construction and that need not necessarily be a matter which has to be dealt with by this Court.

HAYNE J:   Does not ASIC v Edensor present you with some problems about that?  It was held, was it not, that ASIC was relevantly the Commonwealth for 75 purposes.

MR WYLES:   For the section 75 purposes and I recognise it presents some problem, but this issue has not been considered and was certainly not considered in Edensor.

McHUGH J:   You can take all these points at the trial.  If you go down, you can apply for special leave to appeal.  Why should we remove the case?  Why should we interrupt proceedings that are well and truly under way?

MR WYLES:   The only response that I can make to that is because we cannot avoid belated identification of a point in the morass of the legislation.  The point having been identified and taken, the matter raises matters of importance, it is submitted, which are appropriate to be dealt with by this Court.  The reason it raises matters of importance is because if we are right on the 11(7) argument which we put forward, then the reality is the question of whether or not this scheme, this fiction, can be used to overcome the apparent want of power which ASIC has.  That is a matter of most significant importance.  Finally I say to your Honours that, as was pointed out in Sankey v Whitlam, the applicant has a right not to be pursued where there is no power to pursue him.  They are the only matters we can put.

Can I deal also with the provisions of the ASIC Act 2001 and the Corporations Act 2001. In fact, those provisions rely upon the efficacy of sections 5 and 6 of the Victorian Act to have power, in particular section 1372 of the Corporations Act and section 1372(3) apply Part 10 of the Corporations Act so that a proceeding commenced prior to the commencement of the Corporations Act 2001 can continue only in circumstances where there is efficacy in sections 5 and 6 and possibly 7 of the Corporations (Administrative Actions) Act of Victoria.

Those sections then have raised the question of retrospective application and consequently there is raised the question as to whether or not the referral pursuant to section 37 of the Constitution can in fact refer a power which is a complete and unfettered plenary power in circumstances where it is recognised from the outset that it is a limited plenary power, limited to the extent that at the end of five years it expires in any event without being renewed. In those circumstances, can there be freedom of the Federal Parliament to rely upon that power to enact retrospective legislation? It is submitted that that issue has not been considered. That is not an issue which in our researches we have been able to uncover any decided case where it has emerged. That again is an issue of significant importance and founds the application which is made now for remove.

The applicant cannot but recognise that denial of the application to remove does not deny the arguments and at a point in time if it becomes necessary to do so, if one takes a bleak view of the outcome of the trial, then at a point in time application for special leave can be made.  What is put, your Honours, is that notwithstanding that avenue, the matter is identified and ASIC says it has a complete answer, relying upon Hughes.  That matter, if ASIC is wrong in its contentions, as we submit it is, raises very squarely the remedial steps which have been taken by both the Commonwealth and State Parliaments to overcome what they see as the defects, the paper‑over, the want of power in the Federal Parliament in order to implement a federally regulated corporate governance scheme.  In circumstances where there is regulation and anticipated further regulation by a central regulator of the corporate government scheme, it is submitted it is essential to understand the constitutional basis for the powers of the federal regulator.

Your Honours, Sir Robert Garran in “Prosper the Commonwealth” identified federalism as a compromise. If it is to be allowed that there be a deeming device which can pretend that an action taken by one body pursuant to the laws of the Federal Parliament was in fact an action taken by another body, then there will be no need to amend the Constitution in accordance with section 128 or there would be no need for referral. That is an issue which is a very live issue on this application. Unless your Honours wish me to take you to any other points, we have filed the summary of argument. I have not sought to rehash the points made therein and there is nothing further I can put.

GLEESON CJ:   Thank you, Mr Wyles.  We do not need to hear you, Mr Young.

The applicant seeks an order for removal into this Court of part of a cause pending in the Supreme Court of Victoria.  The proceedings in the Supreme Court of Victoria involve a claim by the Australian Securities and Investments Commission for civil penalties and other orders by reason of alleged contraventions of the Corporations Law of Victoria.  They are part heard.  The trial, which has so far lasted for several weeks, has reached the point where the Commission has closed its case against the defendants, one of whom is the present applicant.

The applicant now wishes to raise arguments concerning the power of the Commission to institute the proceedings and seeks to have part of the cause involving those arguments removed into and decided by this Court.  The arguments upon which the applicant seeks to rely are of such a nature that they can and should be dealt with by the Supreme Court of Victoria.  It would be wrong to interrupt or fragment the part‑heard trial.  This should not be taken to suggest either that we accept that all of the questions which the applicant seeks to agitate are in truth raised by the proceedings in the Supreme Court of Victoria or that we see merit in the applicant’s arguments.  The application for removal is dismissed with costs.

AT 11.33 AM THE MATTER WAS CONCLUDED